Proposed Tax Reform


November 27, 2017

 

Tax Reform & How It May Affect You

In recent months, the House and the Senate have been working on their own versions of new tax cut bills which aim to significantly alter our current tax system. These tax proposals may impact current and future home owners and buyers, as well as revenue from rental properties. The drastic changes are of major importance to the housing market, especially in California, so as always you should stay in touch with your tax accountant as to what degree of tax impact the new laws may have on your personal financial situation.

Preliminary reviews of the proposed reform determine taxpayers in wealthier and more populous states such as California, New York, and New Jersey would be hit the hardest by these bills, leading critics to claim they will do more harm than good. Home owners and buyers in these states are already faced with the highest real estate prices and rental rates in the United States. These individuals would likely be adversely affected by these changes as the proposed bills plan to make changes to property tax deductions and mortgage interest deductions.

 

What To Expect

There are two versions of proposed tax reform currently under consideration. The House bill will repeal state and local tax deductions, while capping property tax deductions at $10,000. The Senate bill will completely repeal state and local tax deductions, property taxes included.

Regarding mortgage interest deductions, both bills introduce a drastically different approach. The Senate has decided to leave the deduction as is, which real estate lobbyists have been pushing for. Whereas the House plans to halve the current cap for mortgage interest deduction from $1,000,000 to $500,000. As of 2017, the median home price in San Diego is $595,000, and this year over 60% of homes sold in Orange County sold for over $600,000.

While the overall impact of these bills is still not completely clear, one thing is for sure. The majority of home buyers in California, especially southern California and the SF Bay Area, would no longer be able to utilize the full advantage of a mortgage interest expense deduction. Apparently this bill only applies to new mortgages, existing mortgages will remain able to claim the deduction as it currently stands. One possible outcome to all of this is that the new home buying market may be further limited moving forward. This may actually serve to keep the rental market alive and well.

 

Located in Del Mar, California, North County Property Group provides real estate sales & leasing, property management, and vacation rental services in the various communities throughout the greater North County San Diego area (click here to see communities served).

For more information about North County Property Group, visit http://www.ncpropertygroup.com, or contact the company at 445 Marine View Ave, Suite 240, Del Mar, CA 92014, USA; Tel: 858.792.5797; E-mail: info@ncpropertygroup.com to learn how we’re redefining real estate sales and leasing, property management, and vacation rentals in North County San Diego.

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